Institutions & Hedge funds moving into Bitcoin and Gold
This report is not meant as financial advice and please do your own research and take responsibility for your own trades. This report is meant to update you regarding the markets so that you can make informed decisions.
This article is a summary of my research on big players coming into crypto as well as how the macro landscape favours BTC.
Pomp and Dan Tapiero.
“Anthony Pompliano is an American entrepreneur and investor. He has built and sold numerous companies, ran Product & Growth teams at Facebook and Snapchat, and invested over $100 million in early-stage technology companies. He is also a founder and partner at Morgan Creek Digital, a hedge fund which specializes in blockchain technology and digital assets, and backed by investment management firm Morgan Creek Capital.”
Dan Tapiero is a veteran global macro investor and a co-founder of Gold Bullion International with 25 years of experience investing across asset classes on Wall Street. Having worked as a portfolio manager and analyst he became aware of Bitcoin in 2013, initially writing it off for having a too-small market cap and a “VC plaything”. A very dear friend of Raoul Pal that has recently become a Bitcoin convert. You can check out the interview here.
The retail and large institution has different portfolio and investment decisions metrics. Retail usually more risk-taking, 30% to 100% BTC. Institutions care more about capital protection with stable gains. Funds typically allocate 5–10% into gold and for him is about 3% into bitcoin.
BTC market is currently too small for the institutions to get in, slippage is too high as their volume is huge. Much more funds are looking to get in once BTC hits $30,000 and above, when the cryptomarkets will be ready to handle these large orders.
Institutions and hedge funds are currently facing problems with bonds yielding negative which they have not experienced before and thus looking at gold to hedge. They are very slow in the adoption of new portfolio structures and Dan sees them taking another 5 years at least to touch BTC. The institutions are just going into gold and he sees a 4000$ Gold and 300k$ BTC.
We need BTC to be more established for them to get approval from investors/management and have more liquidity to take their large orders.
Physical gold versus BTC?
Dan believes Bitcoin will be much bigger than gold over a span up to 50 years as the world understands BTC more and more.
BTC is a value protocol network for the internet while Gold is a store of value. Bitcoin is way bigger than just digital gold. Satoshi has solved the byzantine general’s problem using technology.
This is almost similar to the invention of the internet or electricity, Bitcoin has the potential to grow up to the entire size of the legacy financial system.
The future of finance will be tokenized on blockchains and BTC is just a start. Stocks, Bonds and ETF will all be on the blockchain in the future, this saves a tremendous amount of time by automating clearing and settlement cycles.
Reasons Dan is bullish on BTC & Gold and why he believe more and more funds will get in to sound money assets is due to the negative interest rates environment.
The inflating USD this year where 20% of M2 supply was created during the covid lockdown has also alerted many macro investors to start hedging into sound assets, which lead to famous CEOs like Micheal Saylor to invest into BTC. This is due to BTC not only having sounds money principles to be a store of value but it has an insane asymmetrical risk to reward.
Raoul Pal, a former hedge fund executive who also worked at Goldman Sachs and runs an investment strategy service called Global Macro Investor, co-founded Real Vision. Since then, 20,000 people have signed up, paying $180 a year to hear directly from financial insiders. He leads Real Vision to provide unparalleled access to the very best insights and analysis from the brightest financial minds. He prides himself on being a Business Cycle Economist, Investment Strategist, and Economic Historian.
Bullish case for BTC
Daily minted supply of 900 BTC per day is being absorbed by Grayscale, PayPal and Square almost instantly. The supply coming into the market is so low, with more and more buyers buying and removing it from exchanges. BTC will be much bigger in the future than we can imagine. Raoul has never seen a market with such a big gap between demand and supply before.
Why favor BTC over Ethereum?
The institution money is not flooding into Ethereum yet. BTC is a much easier trade as you can just follow where the money is flowing. Buying BTC now is a once in a lifetime chance to front-run the institutions.
Bitcoin is eating all other asset classes for lunch, many retail and family offices are asking themselves why to bother holding other assets other than bitcoin. Might have 30–40% pullbacks but the risk to rewards is so good.
Although the hype is not as high as before, 2017 was driven mainly by retail hype but now is pure fundamentals of sound money with institution money. The institutions and family offices and endowments are being onboarded at an enormous pace. This cycle has not even started yet. The hype is no here but people with real money are interested in loading up before the hype.
Analysts are saying the vaccine and the improving stock market situation will be bad for bitcoin’s price.
Raoul disagrees, he feels that the market is too optimistic over the vaccine news. The production is slow and the logistics to distribute it will be tough and a lot of political instability will arise due to the fight for the vaccine. He sees the large scale production of a vaccine to only happen Q3 next year.
He is also bullish for BTC as Euro-zone’s economy is crumbling fast. The USA is also going thru lockdown during one of the most profitable seasons of the year. He also foresees more stimulus coming from the banks which will further devalue the USD.
Stock markets are an extremely emotional market and although the SPX has been rallying, the fundamentals behind are lacklustre. To come to this conclusion, we need to look at the market that knows all which is the bond market. We have seen the bond market dropped significantly for the past year and it signals to investors that something is not right with the economy.
Bitcoin’s identity crisis
Is bitcoin a Store of value or a higher beta play against equities?
Raoul thinks there is more than this and that BTC is the future of the finance industry and that in the future it will be connected to the central bank digital currencies that USA and Europe have been developing. He says that the correlations are irrelevant and that BTC is beautiful in the sense that it can be both a store of value and a BETA play against equities at the same time which can be seen by its insane performance for this year which has trampled both gold and the stock market. There is no other assets class that resembles BTC at all and this is why its so special and an alpha.
Stock to flow model and ByteTree CIO criticism
Byte tree CIO wishes that the model is true but he says supply doesn’t determine the price but demand does. If BTC becomes too expensive, people will stop buying and this causes the price to drop. Raoul disagrees, he says BTC is not a stock and you cannot evaluate it using PE ratios which has a set definition of how a stock a be evaluated as overvalued or undervalued. BTC is like gold and there is nothing that you can use to determine if its overvalued or undervalued, the price is determined by money flow and its future potential. The way to evaluate Bitcoin is by its network effect, assets with network effects tend to have exponential curves like APPL and Facebook. Gold already has a widely developed network which will cap its upside while BTC is just getting started.
Allocation and risk in BTC
Raoul has 75% of his liquid assets into BTC, which is a large portion especially with the potential downdraw of this portfolio. He is fine as he says as long as he has income, he is able to handle the downdraw and profit from the upside which he thinks has an extremely high chance of succeeding.. He says that it is the best risk to reward play in his lifetime which is why he is so irresponsibly long BTC. He recommends the typical investor in their 30s with 100k spare cash to invest to throw 50% in. He says the 50k is easily recoverable but that 50k can become 10x into half a million which is potentially life-changing. He once again reiterates how BTC is a once in a lifetime chance to make life-changing wealth.
150k/BTC conservative prediction by end of next year and he think the stock to flow model is legit His personal target is that its underpricing the asset and that it will hit 250k/BTC based on his research of money flow.
Paul Tudor Jones
Speaker Biography from Wikipedia:
“Paul Tudor Jones II (born September 28, 1954) is an American billionaire hedge fund manager, conservationist and philanthropist. In 1980, he founded his hedge fund, Tudor Investment Corporation, an asset management firm headquartered in Stamford, Connecticut. Eight years later he founded the Robin Hood Foundation, which focuses on poverty reduction. “
Paul Tudor Jones shills Bitcoin and Altcoins on Yahoo finance. He say crypto as a whole reminds him of internet stocks in the 90s where many alphas as found due to how the market misprice them. This is because many people cannot see the innovation that this technology is going to make and analyst are unsure how to evaluate prices due to its uniqueness. Bitcoins 500 billion market cap is just so mispriced due to stocks being valued at.
Bitcoin is expected to evolve into the precious crypto to store value while having some industrial Crypto for transactions similar to how precious metals are split now. Very bullish with such a huge name advocating for crypto. We must thank Michael Saylor for starting the traditional investor hype train. I believe he at least has a single-digit per cent allocation into BTC.
As you can see, the brightest mind in big money is already waking up to the power of BTC and the next few years will be the regulatory and legitimization period of BTC. It is just amazing seeing how the public image of BTC changed from a method of terrorist funding to a legitimate digital gold. Its truly a great time to be alive and be able to buy Bitcoin, even for $50, allowing to layman to participate in this financial revolution.
Be irresponsibly long!
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